Bitesize InsurTech: Next Insurance
May 5, 2017 Chris Sandilands
Next Insurance is an MGA focused on SME insurance in the USA. They just announced a $29m dollar investment led by Munich Re. The business launched its first product in late 2016.
Guy Goldstein, the Co-Founder and CEO, explained that he set up the business for two reasons. First, products currently available in the US market are generic, not tailored to the needs of specific SMEs. Second, most business goes through agents, meaning there is a big opportunity for digital distributors to grow share.
Next Insurance create their own products customised for particular professions – they started with personal trainers and photographers and now have some eight professions. They offer only one quote per application (i.e. not a panel offering like Simply Business) and have a number of insurance partners including Munich Re and Markel.
The company is aiming to fulfil all sales fully online, although they do provide a support number. Guy told us that 95% of customer convert without speaking to an agent – this is interesting for reasons we explain below.
We understand that the company’s customers include both new companies who do not have a prior carrier and companies being pulled away from their traditional agency relationships. The strength of the customer-agent relationship is an interesting theme we will touch on in our commentary next week.
The Oxbow Partners view
It’s early days for Next Insurance, so the data may not be representative of the market. But as things stand, the interesting datapoint is that 95% of customers convert without speaking to an agent. This is something that no digital intermediary has achieved before in the SME space. Simply Business, the UK market leader, has a sizeable contact centre in Northampton; Coverzones, an online SME broker that traded in the late 2000s went belly up in 2010 as its zealously no-phone model did not gain traction.
Our research in the SME space suggests that customers take a lot of interest in their coverage. Speaking to a broker gives them the confidence that their business and employees are protected. So what explains Next insurance’s high online conversion rate?
There are two likely explanations. One is that their highly customised products and simple, single-insurer sales process gives customers the confidence to buy without offline advice; we could well believe this from some mystery shopping. On the other hand, it could be the case that the trades that they have launched to date are particularly simple ones with relatively little variation between practitioners, and that offline interactions will increase as they move into new areas.
We shall see – and with $29m in the bank, Next Insurance has the funds to build out some offline capability if needed.